Canada shields its own pension plans from tax but hits foreign investors with a 25% levy
Canada taxes foreign pension capital invested in real estate at rates a Dutch manager says can reach 26 percent, while exempting its own pension plans from income tax on investments held inside the plan.
iPolitics reported that a Netherlands-based investor managing €17.8bn now wants Ottawa to close that gap.
Bouwinvest is lobbying the federal government to ease the tax rules applied to foreign pension funds buying Canadian property, according to federal lobbying disclosures reported by the same outlet.
The firm's lobbyist registration lists a single ask: advocating for tax and regulatory changes to increase the viability of Dutch pension fund investment, particularly in the real estate sector.
The proposal would matter on both sides.
In a website post, Bouwinvest said its proposed "reciprocal framework" would give Dutch and Canadian pension funds "a level playing field."
It would also drive new Canadian investment in "housing, infrastructure, energy transition and other real assets," the firm said, and ease Canadian funds' entry into European markets.
Under current rules, the firm said, Dutch institutional pension capital can "face tax treatment in Canada of up to 26 percent."
The tax treatment of institutional investors splits along residency.
Canada exempts the investments of Canadian pension plans from income taxes as long as they remain part of the plan, iPolitics reported, while Ottawa applies a 25 percent withholding tax to foreign institutional investors.
That rate depends on where the fund is based, because some countries hold specific tax treaties with Canada that lower it.
Canada and the Netherlands already hold an active treaty meant to avoid double taxation, a Finance Department spokesperson noted.
Bouwinvest's Canadian lobbyist, Stefano Holland of Crestview Strategy, met federal officials earlier this month from the Prime Minister's Office, Finance Canada, the housing minister's office and Natural Resources Canada, according to the federal lobbyist registry.
Holland has filed 10 communication reports for the work, six of them dated June 15.
On that day, the reports show, he discussed the firm's ask with the finance minister's policy director, Varun Srivatsan, and with Matthew O'Connell, the Finance Department's deputy director for financial sector policy, among others.
A Finance Department spokesperson would not say whether the government supported the changes.
"The Government continually reviews the tax and benefit system and it would be inappropriate to speculate on any potential or prospective changes," Marie-France Faucher said in a statement.
Bouwinvest did not immediately respond when iPolitics reached the firm on Wednesday.
Silas Xuereb, a policy analyst and economist with Canadians for Tax Fairness, said favouring domestic pension funds makes sense because it encourages them to invest in Canada, giving Canadians "more control over what we invest in."
He said Canadian pension funds are not short on cash, collectively managing an estimated $4.5tn in assets, but argued the problem is that they do not spend at home, with three-fourths of the investments by the eight largest funds sitting outside the country.
"Instead of providing more tax breaks, which are an unproven way to stimulate investment, we should require our own pension funds to invest more within Canada," he said.
Xuereb said the Netherlands is "widely regarded as a tax haven," and urged Canada to "negotiate international tax issues through the UN Tax Convention instead of bilateral treaties."
Bouwinvest already invests in Canada, having backed recent housing projects in Metro Vancouver, including mixed-use developments near major hospitals aimed at health-care workers, and said the "right framework would allow that model to scale further."
The proposal is "practical and mutually beneficial," Mark Siezen, CEO of Bouwinvest, said in the post.
The framework "supports housing delivery" and "strengthens economic ties between like-minded countries," he added, while creating fresh opportunities for Dutch and Canadian pension funds.
The lobbying comes as Ottawa faces a January 1 deadline on its foreign home buyer ban, first introduced in 2023 and subject to two-year renewals.
NDP parliamentary leader Don Davies said the country's main problem is affordability rather than supply.
The country faces "an affordable housing crisis," not a housing crisis, he said in an interview on Wednesday, calling the distinction key.
There is no shortage of product for wealthy buyers or investors, he added, only "a lack of affordable housing supply."
Davies urged Canadian pension plans to spend more at home on affordable housing that foreign rivals such as Bouwinvest would not pursue.
